Real Estate Projection: The Later You Buy, the More You Will Fight

The emotions of home buying vs. the logic of home buying is an interesting philosophical quandary. While I would argue that most folks purchase based on lifestyle more than pure logic alone, the current market whipsaws have impacted buyers’ and sellers’ perspectives on both these fronts. The emotional strain of “I won’t pay over market value” froze many buyers during what we like to refer to as the Real Estate Unicorn years of 2020 through mid-2022, only for many of those buyers to feel regret when values only increased and then rates spiked. The logic of home buying has been anything but easy to wrap your head around when we saw such a rapid rise and many consumers have the 2006-2008 collapse fresh on their minds. Hopefully, most buyers and sellers are now able to recognize that we are in an entirely unique set of circumstances and the most important questions is: What happens next?

Economic and housing forecasts are as reliable as those of the Northern Arizona weather forecasts. While not pinpoint accurate, they are based on broad data sets and can be generally accurate. I cannot tell you the exact date and time in 2024 to secure the best buying or selling opportunity; however, one prediction I’m fairly confident about is that the longer buyers wait, the more they’ll compete, and the longer sellers wait, the better their prices may fare. The reason – two different aspects of supply and demand.

SUPPLY AND DEMAND WITH MORTGAGE RATES

A hot and exhausting topic of interest rates will continue to have massive impact on the market. We currently sit below the 25-year highs seen in October and are hovering near 18-month lows. The first chart shows projections on continued inflation activity, and many experts predict that if we can see year-over-year Core PCE, Personal Consumption Expenditure (inflation), below 2.5% then we could see the first Fed fund rate cuts, which will likely help mortgage rates come down as well. This could be as early as March but very likely at least by the May meeting. The Fed is still working on balance sheet reduction, as they were one of the largest buyers of mortgage-backed securities during 2020-2022. Experts predict they’ll continue their reduction strategies likely through the third or fourth quarter this year, which greatly impacts the supply and demand of mortgage-backed securities and could be one of the tools the Fed uses with the intent of a slow mortgage rate reduction vs. a plummet lower. Predictions for mortgage rates would be then a slow reduction of 1-1.5% in rates from now through the end of 2024, putting us possibly as low as mid-5%’s.

SUPPLY AND DEMAND IN HOUSING

Housing inventory remains incredibly tight. We did see an uptick in available inventory last year and experts expect a 15-20% improvement this year. The bottom line is that households are forming faster than we’re building,…